MarketTalk with Tim Le Cornu and Declan Magennis

Business in the Cayman Islands, Special Report 2011

becomes scarce and investors become more sceptical about the placement and management of their capital. We continue to see a consistent demand for the type of work we do, whether it is asset tracing, liquidating or conducting a forensic review.

Ken Krys and Joanna Lau of KRyS Global in the BVI are the Joint Liquidators of Fairfield Sentry Limited (“Sentry”), Fairfield Sigma Limited (“Sigma”) and Fairfield Lambda Limited (“Lambda”) (all in liquidation). Sentry was a feeder fund which invested over 95% of its assets with Bernard L Madoff Security Services (“BLMIS”). Sigma and Lambda were two 100% feeder funds into Sentry and were respectively denominated in Euro and Swiss Francs. As BLMIS operated an elaborate ponzi scheme, all funds invested were distributed to other BLMIS investors as redemptions and all investments thought to be held by Sentry through BLMIS turned out to be fictitious.

On 6 May 2011 the Liquidators executed a settlement agree- ment with Irving Picard, the US Trustee of BLMIS. The settlement resolves the parties’ claims  against  each  other,  thereby  avoid- ing contentious, costly and uncertain litigation and it provides a structure that enables the Liquidators and the BLMIS Trustee to work jointly and cooperatively in seeking and obtaining recoveries which will enhance their respective estates for the benefit of their respective  stakeholders.

KRyS Global is involved with an increasing number of cross border assignments, particularly with companies holding Asian investments or subsidiaries. An independent firm, such as KRyS Global, often has the advantage over Big 4 firms of not being conflicted in the large, complex cases, particularly as KRyS Global does not offer audit and advisory services.

What trends do you see in the insolvency and restructuring industry over the next two years?

Regulatory bodies are in the process of tightening controls and increasing corporate transparency to prevent fraud and white collar crime. Those companies that cannot comply with the new standards, or who are engaged in unlawful activity may find themselves out in the cold.

Investors, unfairly or unjustly treated, may petition the court to enforce a right belonging to the company itself and/or an individual shareholder. A last resort for a shareholder who has been unfairly treated is to petition the court to wind up the company on a just and equitable basis and seek the appointment of a liquidator.

Insolvency proceedings are a powerful tool in identifying and recovering assets. If used properly, a liquidation involves the appointment of an independent professional over the person or entity to investigate its affairs and identify and recover assets. A liquidator steps into the shoes of the directors of an entity and is entitled to information about the company to which the directors would have been entitled. While liquidators have duties to the court, being independent means that they do not have any bias as to what actions are taken to procure and control assets.

Since the introduction of the various cross border insolvency provisions and the UNCITRAL Model Law in jurisdictions across the world, KRyS Global has noticed an increased ease with which the appointment of an insolvency practitioner in the offshore centres has been granted recognition in foreign jurisdictions. As an example, Ken Krys, in his capacity as the Official Liquidator of Fairfield Sentry Ltd, the largest feeder fund to the Bernie Madoff investment scheme, obtained cross-border recognition under the provisions of Chapter 15 in the US with respect to insolvency proceedings in the British Virgin Islands. This recognition enables the Liquidator to investigate and identify assets located in the US or commence actions against a party located in the US and ultimately realize recoveries for the benefit of the entity’s stakeholders.

How did KRys Global perform in 2010? What are your goals for 2011 and 2012?

KRyS Global continued to grow and expand in 2010 and now has over 40 professionals working from offices in four jurisdictions— with established offices in the Cayman Islands, the Bahamas and British Virgin Islands, and a new office opened late 2010 in Bermuda.

KRyS Global only provides insolvency, liquidation, corporate recovery, forensic accounting and related services which enables us to provide independent, focused and experienced service to our clients. Our staff are experienced and qualified in the field of in- solvency and forensics, and we ensure all engagements are carried out by closely managed teams led by a dedicated director. Clients benefit from these close-knit teams of Professional Accountants, Certified Fraud Examiners, Insolvency professionals and Certified Anti-Money Laundering Specialists. Our practical hands-on ap- proach, along with the depth and range of experience of our profes- sionals, ensures our clients receive answers and remedies specifi- cally suited to meet their needs and demands.

A majority of our work has a cross border element to it, and in this regard, KRyS Global is a member of hww insolvency cooperation partners, a dedicated group of local insolvency specialists in 20 jurisdictions across the US, Europe and Asia. The groups’ objective is to derive the best solutions in cross-border cases by working with a number of other independent insolvency practitioners.